Bacon Shortage is not in the Cards

National headlines are proclaiming a bacon shortage and grocery stores and bacon-burger restaurants may already be raising prices, according to a post Wednesday by Illinois blogger Stu Ellis.

Sep 27, 2012

National headlines are proclaiming a bacon shortage and grocery stores and bacon-burger restaurants may already be raising prices, according to a post Wednesday by Illinois blogger Stu Ellis.

In short, the headlines may push consumers away from even checking prices in the meat case, assuming that bacon is too expensive to afford for a family trying to survive the recession. But what is the real situation with regard to the availability of pork products?

“Hog Producers Appear To Be Holding Onto Their Sows.” That is the headline on USDA’s latest Livestock Outlook , where USDA economists say sow slaughter has not increased over year-ago levels despite the drought that has pushed corn and soybean meal prices higher. In fact, the rate of sow slaughter for June was 9% below June 2011. That is when the drought conditions became apparent and when most producers would have reacted by sending breeding stock to market and cutting back on production expenses. For July, sow slaughter was 5.7% above 2011 levels, but 3.2% below the three year average for July.

For August the slaughter rate was 4% higher than August 2011. However, some of that increase may have been spurred by higher pork prices than the desire to liquidate breeding stock, USDA says. In fact, USDA says higher sow prices suggest that pressure may have eased, and if a large- scale liquidation was underway, it is unlikely prices would have bottomed out as they did.

Johnson predicts fourth quarter 2012 production will be nearly 6.3 billion pounds, 1.6% more than 2011 levels. But she says feed costs will be an issue in early 2013. “Next year, however, record-high feed costs are expected to gain traction, and pull dressed weights in the first three quarters below those of the same period of 2012, as producers push to minimize feed costs while avoiding packer discounts for low-weight animals. Prices of live equivalent 51-52% lean hogs are expected to average $57-$59/cwt. in the fourth quarter, more than 10% below a year ago, and $60-$66/cwt. in the first quarter of 2013.”

One dynamic that is keeping pork prices high for consumers is the continued high level of exports, Ellis reports. U.S. consumers have to compete with pork lovers around the world whose currency goes farther when they are buying products priced in dollars. July exports were nearly 400 million pounds, 3% above July 2011. Japan purchases 27% of pork exported by the United States, followed by 22% for Mexico, 14% for China, then lesser amounts for Russia and Canada. The meat from about one of every four hogs produced in the United States is exported.

Summary

Headlines have forecast a bacon shortage, but according to the latest USDA statistics, that is not in the cards, Ellis says. Pork producers, through the height of the drought, did not reduce the sow herd, indicating they are planning to increase production in 2013, when there is hope for lower feed prices.

Currently, U.S. consumers may feel a shortage of pork, but that is caused by international demand, not by the drought, Ellis concludes.